Random expressions of a Wannabe

Budget

In India, come Feb, it’s time for the release of the mother of all blockbusters – “The Union Budget”. While even the blockbusters of the Khans are just in the vicinity of few 100 crores, this one flies in the space of thousands and hundreds of thousand crores. Isn’t it interesting, that the whole nation awaits with bated breath to find out how the Govt. of the day is going to spend “it’s collective” money in the next 1 year??? So too I was yesterday, when Arun Jaitley the Finance Minister rose oops sat down to present what I would think as one of the most significant budgets in recent years for our country.

Since yesterday afternoon, we have been fed with hours and hours of programming in all current affairs channels with experts dissecting the budget. After having gone through these boiler plate stuff for so many years, I get a feeling that the reactions are mostly pre-determined irrespective of the content of the budget. As in, the verdict on the budget is along expected lines. Panelists from the ruling front sing panegyric paeans on the budget while those from the opposition usually sing the “disappointing” tune rather petulantly :(. Also for experts. For those with leanings towards the Govt. of the day, it is a transformational budget and for those in the other side of the divide it is “trashformational”!!! And for CII – any budget is a 9 on 10 budget!!! This satirical piece – Budget Criticism 101 from The Unrealtimes I feel is not a satire at all but the Annual reality 🙂 🙂 . So I thought why not analyse the budget through a normal aam admi prism devoid of any ideological/political tilt?

As a responsible tax paying citizen of the country, I look for the foll. In the budget:

Does the budget spell out initiatives which can fuel growth in the Indian economy? Overall Economic growth brings in investments, increases jobs for all, raises salaries,…,…

Is there any transformational/game changing idea (or is it Big Bang) which has longer term impact for the country? – Like De-licensing, Gram Sadak Yojana, Aadhaar, GST,…,…

India is notorious for its archaic regulations and laws. Is the Govt. doing anything to make life simpler for doing business – local or foreign?

What’s in it for the poorer sections of the people – which is still significantly big in our country?

Finally what are the signals being sent by the Govt. of the day?

Looking at the Modi-Jaitley budget from the above perspective, my sense is that they have presented a “Smart” budget. They know very well that the expectations of all sections of the people are very high and had to do the balancing act to appease everyone. At the same time, elbow space for tough decisions is only available in 2015 and 2016. Beyond that the Govt. gets into re-election mode. It appears to me that, from whole lot of things they need to do (which they have promised) they clearly prioritized the ones which needed to be attended to in this budget. And put off a few for the future. And I feel that’s the way to go.

The budget indeed brings in focus back to economic growth without being apologetic about it. Focus on infrastructure, Corporate Tax cut, Job creation,.. signal that.

Though there are no new transformational ideas in this budget – to be fair to Modi – he didn’t wait for the budget to announce a few. Ideas like the Jan Dhan Yojana, Swachh Bharat Abhiyan and Make in India – all transformational ideas were kicked off last year itself. This is a welcome sign. Finally GST gets a final deadline.

Cleaning up gets a lot of attention. Whether it is Swachh Bharat, Clean Ganga or for that matter Black money cleansing!!!

The Universal Social security net for all Indians is an interesting initiative. That it is through the insurance route comes as a relief. Otherwise India could end up suffering like most of the European economies with very high long term liabilities.

The Govt. has clearly for this year atleast prioritized on domestic investors rather than foreign if one looks at the introduction of SETU fund …and no major FDI relaxations.

The pandering to salaried class interests with more income tax cuts or other gimmicks have been I guess postponed for years closer to 2019!!!

Again things like flowing money to Smart Cities, Digital India are on hold in this budget. Means could tap the private route for these initiatives or will be taken up in the coming years when tax collections are more buoyant with better economic growth.

I see a lot of critiques on the increase of Service tax rate from 12.6% to 14% which will overall shrink our wallets. But I think this is a clear attempt to prepare all of us for the introduction of GST which will be at a higher rate of may be 16%!

Any budget proposal will have its share of misses. And there were a few in this too. However overall, I think it is a Smart, Working, Balanced budget which sets the tone for the economy to grow in the coming years. Taking up a few important issues and implementing them is better than announcing a slew of initiatives and outlays and messing up the outcomes. So in that sense Sir, it is a Plus budget!!! And I guess the FM scored well if not a centum!!

India has indeed reached a sweet spot. We must now be in a hurry to change its status from #WorkinProgress to #JustArrived!!!

I wonder if there is any other country in the world where the Annual budget presentation by the Govt. is attached so much hype and importance as in India. The Oxford English Dictionary lists the meaning of the word Budget as:

Noun

an estimate of income and expenditure for a set period of time

(Budget) an annual or other regular estimate of national revenue and expenditure put forward by a finance minister

the amount of money needed or available for a purpose

archaic – a quantity of written or printed material

I tend to believe these days that the meaning of Budget is just close to the 4th one mentioned above. It’s intriguing to find out why is there such a fuss over what should be normal hisab kitab? Well, some of it I guess is historical and rest mostly hysterical. In the pre-lib era or during the license permit Raj, budgets were meant always to give bad news about increasing income taxes, raise in excise duty and what not. So, no wonder in that time people were pretty anxious about the budget pronouncements and speculations were rife of price rises. However in 1991, what is regarded as a watershed budget presented by the current Prime Minister Dr. Manmohan Singh, path breaking reforms were announced. From then on I guess the normal presentation of income and expenditure for the forthcoming year has turned out to be the Govt.’s Annual policy statement. The result is that once the budget is presented, discussed (so we believe) and passed, all the ministries in general and the finance ministry in particular stop thinking for the rest of the year. So much so that Feb/ Mar is the only period where we can get to see the Hon. Finance minister talking of growth, numbers,.. and for the rest of the year he becomes the Hon. Minister for Fire Fighting! People expect that when the FM rises to the present the Union budget, he rises to the occasion and delivers a path breaking budget year after year. However in the last 10 years or so we have been only seeing unimaginative, tepid budgets being presented which has no vision or a game changing road map for the country. Is it that the scope of reforms to be carried out is over and the job is all done? Nope.

I’ve no doubts in my mind that once the budget is presented with some numbers, no one in the Govt. goes through that document again for the rest of the year. It’s a simple fact that “What gets reviewed gets done”. But in Govt., forget review, even the budget document is not viewed later! As the budget day approaches, there is a frenzy of activity in the media which creates a massive hysteria and expectation year after year for the budget. There are pre-budget discussions, during budget analysis, post budget discussions, analysis were learned economists hold forth on what could be in store. On the budget day, the FM appears in channel after channel and gives “Exclusive” interviews to each one of them! The unfortunate part is that once the budget week is over the media forgets about the promises, provisions and the math of the budget. Won’t it be a good idea if the news channels interview the FM once in a quarter and review the promises and remind him of some of the unkept ones? Like the annual budget speech, will it not be a good practice to have the FM present progress made every quarter in the parliament so that closure is attained on the commitments made? I would like to substantiate my concern with a couple of examples:

“Point 22. As Hon’ble Members are aware, the Direct Taxes Code Bill was introduced in Parliament in August, 2010. After receiving the report of the StandingCommittee, we shall be able to finalize the Code for its enactment during2011-12”

Nothing of this happened in 2011-12. What is the status now? The current year budget speech says:

“Point 26. As Hon’ble Members are aware, the Direct Taxes Code (DTC) Bill was introduced in Parliament in August 2010. It was our earnest desire to give effect to DTC from April 1, 2012. However, we received the Report of the Parliamentary Standing Committee on March 9, 2012. We will examine the report expeditiously and take steps for the enactment of DTC at the earliest.”

Example 2:

“Point 23. Unlike DTC, decisions on the GST have to be taken in concert with the States with whom our dialogue has made considerable progress in the last fouryears. Areas of divergence have been narrowed. As a step towards the roll-out ofGST, I propose to introduce the Constitution Amendment Bill in this session ofParliament. Work is also underway on drafting of the model legislation for theCentral and State GST”

What’s the status in Mar 2012?

“Point 27. Similarly, the Constitution Amendment Bill, a preparatory step in the implementation of Goods and Services Tax (GST) was introduced in Parliament in March 2011 and is before the Parliamentary Standing Committee. As we await recommendations of the Committee, drafting of model legislation for Centre and State GST in concert with States is under progress”

1 year has passed since and we don’t seem to have made any progress and with this it is 5 years since we started talking about migration to a common Goods and Services Tax in India. If only a quarterly stock taking of such important steps happens, I’m sure these can be expedited.

According to me, GST would be the single largest Tax reform post 1991 which will pave the way for removal of so many different State and Central taxes, make goods movement within the country easier and in short make “doing business” in the country a lot simpler. I remember vividly that when VAT was introduced in India finally in 2005 there were a lot of apprehensions from states, traders and other stake holders about the same. Finally it’s obvious that all those apprehensions were mis-guided and VAT has changed life for the better. Govt. must reach out to all stake holders aggressively to remove any misgivings and show the way for implementation of GST quickly. To summarise, in the last 10 years there has been a serious deficit of Big ideas and surplus of run of the mill thoughts in the budgets. ( Not to forget, there has been a surplus of schemes named under Rajiv Gandhi, Indira Gandhi, Nehru – last count 12 in the centre and 52 in the states as well !!! )

Manmohan Singh who created history as a finance minister had (or still has) the opportunity to make history once again this time as Prime Minister. Instead of getting choked under the pretext of “coalition pressure” and allow the country to explode, if he can use his economic mind as a “Safety Valve” , he will avert a disaster and make it to headlines of history. Talking of headlines, that even the FM is nervous about the headlines he makes the next day can be borne out by the last lines in his 2012 budget speech – “Whether or not today’s announcements make tomorrow morning’s headlines matters little, as long as they help in shaping the headlines that describe India a decade from now”. Well one hopes that Pranabda is prophetic on this one.

P.S: As I draw close to this lamenting piece, I get reminded of an interesting episode which I would like to share on a lighter vein. In our B School in 1990, as part of the Perspective Management course, one of the assignments given was to create the Economic Times newspaper of 10 years hence i.e. dated 1st Mar 2000 (the next day of budget). While we all drove our creative horses all over the place to create futuristic content for the Eco times newspaper our professor while reviewing our creations said “you never know, in year 2000, the newspaper may be dead and you may just have a video cassette!”. Well, we are now in 2012. The more things change, the more they stay the same. The Eco times newspaper is alive and kicking and comes up with a monster of an edition the next day of the budget! The big change of course has been the online edition! One hopes that in my life, I can see the FM walking hands free (and not with his trademark brown briefcase) into the parliament and makes a budget speech from a Nano pen drive or some such uber cool device!!! I realised that this brown briefcase is also a colonial hangover from the British which we have not got over ! Look at this picture of George Osborne, the Chancellor of UK posing on the “Budget Day”!!!

I only hope that our FM doesn’t copy Osborne’s tax proposals as well. In this year’s budget, Osborne has imposed what is now called as stealth “Granny tax” whereby anyone retiring from April 5, 2013, will be stripped of the tax break introduced by Winston Churchill in 1925 !!! India’s Senior citizens beware !